There is no doubt about it. Warren Buffett is the greatest investor of all time.
The Oracle of Omaha has helmed Berkshire Hathaway (BRK.A +1.25%) (BRK.B +1.63%) for nearly 60 years now, delivering a compound annual return of 20.1% from 1965 to 2021. That's almost double that of the S&P 500 at 10.5% during the same time period. In total, the stock returned 3,641,613% during that period, meaning it would have turned $1,000 into a whopping $36.4 million.
Given that track record, it's not surprising so many investors look to follow Buffett's approach. The famed value investor has been most successful in bear markets, and he's known for his advice to be greedy when others are fearful.
While Buffett hasn't reported what stocks he has bought during the third quarter, it's good a bet that he's taken advantage of the recent sell-off. Let's take a look at a few stocks that Buffett was eagerly buying in the second quarter this year.
1. Apple
Berkshire's move into Apple (AAPL +0.44%) has surprised some Buffett acolytes as he has historically avoided tech stocks. Though Buffett wasn't involved in Berkshire's original purchase of Apple back in 2016 -- it was made by one of his deputies -- he has become a big believer in the iPhone maker since then.
He's touted it as an "extraordinary consumer franchise," and said it's probably the best business in the world. Indeed, the tech giant has an impressive set of competitive advantages with an installed base of over 1 billion devices, and huge margins, thanks to its brand, dominance of the smartphone market, and its services business, anchored by the App Store.
NASDAQ: AAPL
Key Data Points
Buffett is so confident in Apple that it's become Berkshire's biggest stock holding, and he even said he thinks of it as Berkshire's third business, rather than a stock.
In the second quarter, Berkshire bought nearly 4 million shares of Apple, shelling out roughly $600 million for the purchase. That bet appears to be well timed as Apple stock is up 13% this quarter, outperforming the S&P 500, which has gained just 4%.
Apple stock is still down 15% from its peak at the start of the year, meaning it wouldn't be surprising if Berkshire bought more of it in the third quarter.
2. Chevron
Buffett has long been a believer in the energy sector. Though cash flows are volatile depending on oil prices, there's no question that the global economy still relies on oil and gas, and many energy stocks pay generous dividends to boot.
Berkshire has its own energy subsidiary, Berkshire Hathaway Energy, and also owns stakes in a number of energy stocks, including Chevron (CVX +0.98%), its biggest holding in the sector.
NYSE: CVX
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Berkshire bought 2.3 million Chevron shares in the second quarter, spending about $360 million on the energy giant.
Even as oil prices have pulled back in the third quarter, Chevron shares have remained steady, a sign that it may be less at risk from a decline in oil prices than its peers. Buffett has said he believes Chevron is undervalued, and the stock still looks appealing at price-to-earnings ratio of 11 and a dividend yield of 3.5%. If the price of oil stays elevated, Chevron should be a winner.
3. Berkshire Hathaway
Finally, the last stock Berkshire Hathaway couldn't stop buying as the market plummeted is its own. In the second quarter, the company repurchased approximately $1 billion of its own stock, a sign that Buffett continues to view Berkshire shares as undervalued.
Unlike most companies, which have limited share repurchase authorizations determined by the board of directors, Berkshire's policy allows the company to repurchase its stock whenever Buffett and Vice Chairman Charlie Munger see fit, as long as cash and equivalents remain above $30 billion. At one point, Buffett required that the stock be below 1.2 times book value, but now he just uses his estimate of the company's "intrinsic value" as the yardstick for repurchases.
NYSE: BRK.B
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The second-quarter buybacks were actually lower than they've been in other recent quarters, perhaps a sign that the company would rather deploy capital to buy other stocks.
After falling sharply in the second quarter, Berkshire stock has been stable in the third quarter, one indicator that the repurchases likely continued.
Investors don't know what Buffett has purchased this quarter, but there's one thing you can count on: With the bear market persisting, the billionaire value investor has almost certainly been busy buying stocks. If you want to invest along with him, the three names above are a great place to start.
